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Revisiting the Fisher parity consistency for the Swiss economy around the modification of the National Bank?s monetary policy strategy

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  • David Neto

Abstract

This paper aims at testing a smooth time-varying long-run relationship between the Swiss interest rates and inflation around the modification of the monetary policy strategy. In order to test for time-invariant cointegration hypothesis, we use a general cointegration model, allowing the long-run parameters to vary smoothly and slowly over time. Our finding states that the time-invariant assumption is too restrictive for the Swiss Fisher puzzle. Additionally, it is found that the full Fisher effect (i.e. the superneutrality of the inflation) cannot be rejected over the considered period.

Suggested Citation

  • David Neto, 2015. "Revisiting the Fisher parity consistency for the Swiss economy around the modification of the National Bank?s monetary policy strategy," International Economics, CEPII research center, issue 144, pages 83-94.
    • Handle: RePEc:cii:cepiie:2015-q4-144-5
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    Keywords

    Chebyshev time-polynomials; Fisher parity; Mundell–Tobin effect; Smooth time-varying cointegration; FMLS estimator; Fully modified Wald test; DOLS;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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